US says 5 from China’s military stole trade secrets

First criminal charges against foreign country for cyberspying

Share via e-mail

By Ellen Nakashima, William Wan and William BraniginWashington Post
May 20, 2014

WASHINGTON — The Justice Department on Monday accused five members of China’s military of conducting economic cyber-espionage against American companies, the first time the United States has leveled such criminal charges against a foreign country.

Industries targeted by the alleged cyberspying ranged from nuclear to steel to solar energy, officials said. The hacking by a military unit in Shanghai, they said, was conducted for no other reason than to give a competitive advantage to Chinese companies, including state-owned enterprises.

In a statement, Attorney General Eric Holder said: ‘‘The range of trade secrets and other sensitive business information stolen in this case is significant and demands an aggressive response.”

Holder said the Obama administration ‘‘will not tolerate actions by any nation that seeks to illegally sabotage American companies and undermine the integrity of fair competition in the operation of the free market.’’

In response, China’s Foreign Ministry said the US government ‘‘fabricated facts’’ in the indictment, which it said ‘‘seriously violates basic norms of international relations and damages Sino-US cooperation and mutual trust.’’ It said China lodged a protest, urging the United States to ‘‘correct the error immediately and withdraw its so-called prosecution.’’

In retaliation, the statement said, ‘‘China has decided to suspend the activities of Sino-US Cyber Working Group.’’ It left open the prospect of ‘‘further reaction’’ in the case.

The indictment against members of the People’s Liberation Army follows vows by senior administration officials to hold other nations to account for computer theft of intellectual property.

China is widely seen as the nation that has been most aggressive in waging cyber-espionage against the United States.

Holder said a federal grand jury in Pittsburgh returned an indictment against five members of a Chinese military unit in a Shanghai building, accusing them of conspiring together and with others to hack into the computers of six US entities. Named as defendants were Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu, and Gu Chunhui, all officers of Unit 61398 of the 3d Department of the People’s Liberation Army. Wang is also known as UglyGorilla, his hacker handle. Gu used the alias KandyGoo, and Sun was also known as Jack Sun, prosecutors said.

The indictment alleges that in some cases the hackers stole trade secrets that would have been particularly beneficial to Chinese companies. For example, it alleges an Oregon producer of solar panel technology, SolarWorld, was rapidly losing market share to Chinese competitors who were systematically pricing exports well below production costs. At the same time, defendant Wen stole thousands of files containing cost and pricing information from the company, the indictment says.

It also alleges that while Westinghouse Electric, a nuclear power plant manufacturer, was negotiating with a Chinese company over construction of four power plants in China, defendant Sun stole confidential specifications for pipes, pipe supports, and pipe routing for those plants — information that would enable any competitor looking to build a similar plant to save on research and development costs.

Each of the defendants was charged with 31 counts for alleged offenses between 2006 and 2014. If convicted, they would face decades in prison. However, they are in China, US officials acknowledged, and there is virtually no chance the Chinese government would turn them over.

The five were indicted May 1, and the indictment was unsealed Sunday and docketed Monday.

The charges are being brought in Pennsylvania, where several companies that were allegedly victimized are located.

Estimates of the cost to the United States of commercial cyber-espionage range from $24 billion to $120 billion annually. China is by far the country that engages in the most such activity against the United States, according to a US national intelligence estimate.